The investor’s field guide · S
Seller finance
Funding in which a seller allows a buyer to pay part of a purchase price over time, often through a loan.
Explained by the editorial team
Seller finance means the seller helps fund the acquisition by accepting later payment rather than all cash at completion. In the US, the arrangement is often called seller financing or a seller note. Interest, security, repayment dates and remedies depend on the documents.
A worked example
For an illustrative £500,000 purchase, the buyer pays £350,000 at completion and owes £150,000 under a seller loan. The business still needs enough cash to operate and meet those repayments. A smaller initial payment does not make the remaining obligation disappear.
What to examine
Consider whether a bank lender ranks ahead of the seller and whether payments can be blocked. Check security, guarantees, repayment flexibility and what happens after a default. For a seller, accepting finance creates credit exposure to the buyer. For a buyer, optimistic cash forecasts can make an apparently manageable purchase unaffordable. Take advice on the structure in the relevant jurisdiction.
General information, not investment, legal or tax advice. Examples are illustrative. Read the disclaimer.